(HOGS) – Zhongpin Inc – PEG ratio is approximately 0.26, a significant discount to the industry average of 1.2
Zhongpin Inc. (HOGS) just raised earnings guidance and it trading at a bargain PEG ratio of just 0.26. The company hopes to build off of a second quarter as one of its newest plants is already contributing to revenue.
Company Description
Zhongpin is a Chinese-based meat and food processing company that specializes in pork and pork products, vegetables and fruits. It distributes its food products in 20 provinces through more than 2,900 retail outlets throughout China. Zhongpin’s export markets include the European Union, Eastern Europe, Russia, Hong Kong, Japan and South Korea.
The company is headquartered in Changge City, China, employs approximately 3,900 people, and has a market cap of $234 million.
Bullish Guidance
Zhongpin revised its 2008 earnings guidance on Oct 10. The company is not expecting full-year 2008 earnings to be between $1.15 and $1.19. Originally, Zhongpin forecast earnings between 98 cents and $1.07.
Company executives credit higher demand due to lower pork prices and additional production from the new plant in Luoyang.
Building Off of a Strong Quarter
On Aug 11 Zhongpin reported 116% year-over-year increase in revenue, during its second quarter earnings announcement. Revenues of $137.5 million, up from $63.7 million, produced earnings per share of 29 cents. The announcement was 5 cents higher than the consensus estimate, making it the third surprise in the past 4 quarters.
Solid Valuations
Analysts are expecting full-year 2009 earnings to be $1.44 per share, yielding a growth rate of 23%. Given these projections the PEG ratio is approximately 0.26, a significant discount to the industry average of 1.2.
The Chart
Shares of HOGS crashed though the level of support at $10 when the market was selling off this month. While it does appear to be rebounding on bullish guidance and an exuberant market, hopefully the former level of support does not turn into resistance.
Content Courtesy: Zacks Investment Research
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